Another chink in the retail armor… Circuit City closes
A few hours ago Circuit City announced the closing of its business, stores, and website all pending possible restricting under chapter 11 bankruptcy status. While I’ll leave the discussion of the financial impact and possible mismanagement that lead up to this point to more appropriate blogs and their financial gurus, there’s a lot to be said about the digital impact that also contributed to this point and how digital continue to change the world and create more Circuit Cities.
A few hours ago Circuit City announced the closing of its business, stores, and website all pending possible restricting under chapter 11 bankruptcy status. While I’ll leave the discussion of the financial impact and possible mismanagement that lead up to this point to more appropriate blogs and their financial gurus, there’s a lot to be said about the digital impact that also contributed to this point and how digital continue to change the world and create more Circuit Cities.
Circuit City was a staple in the consumer electronics category but like Blockbuster has discovered with video rentals, travel agents with ticket offices, newspaper with print and so many other companies, digital sales have changed the way business is done. People still go into stores and ecommerce only accounts for 10% of retail as a whole but for vertical by vertical there’s a different story to be told. Rather than buying on the spot people now research and compare, they look at every online site, buy from discount or local stores, or ship things to their door. In the consumer electronics space margins are tight and having sales teams and retail overhead kills – ebay vendors sell memory cards for a fraction of the price of retail ones. The transformation has been fast and hard hitting.
As Love Goel, CEO of Growth Ventures Group said in a CNN article on the store, “[c]ircuit City isn’t a viable business in its old incarnation when half of electronics sales have moved online.” The simple fact is that when half of your sales move out of traditional retail and to online no retailer is going to survive the same way. Circuit City innovated – sometimes leading and often following competitors like BestBuy and Walmart by dropping commissions, offering in-store pickup, and getting their own state of the art website but that wasn’t enough. In the dive industry which I’ve been involved in for years online remains a misunderstood beast. Manufacturers in a desperate attempt to shield their long term retailers have tried forbidding online sales as if that will somehow stop the trend. And you can’t blame them, turning a category on a dime is about as feasible as Detroit rebuilding their entire carlines in time for the 2010 models but it still has to happen. Companies selling unauthorized dive products online have seen sales explode because no matter how many roadblocks are sent up, customers will shop in the way they want to and those that try and stop them simply lose out along the way.
So while there’s no good way to spin closing down over 500 stores and the eventual layoff of more than 34,000 employees, the simple truth is that the world is changing… has changed and this was to a degree inevitable. Circuit City could have survived but to do so would have taken a change more radical than was done and perhaps more than was possible. Digital has changed how consumers think about and approach shopping, it’s given them a voice and given them access and its impact has really just begun to take hold. As companies like Zappos innovate with their service, return policies, even fitting tools and descriptions and break new milestones in selling products that never sold online the impact continues to grow. Reviews of every product and service type are exploding in numbers and the bad companies are feeling the impact as customers discover the truth before they buy, before they book, before they even consider it. How companies in traditional retail fight remains to be fully understood and is something I’ll be talking about more in future posts but for today sufficient to say the world has changed today and that it’s not over yet.
Good luck to Circuit City in finding a way to evolve the brand and remain in business under some new vision and even more well wishes to the employees who are sure to be waking up to find that a shaky New Year just got a whole lot more uncertain.
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Relevant posts (the story is early, expect a lot more coverage tomorrow):
MSN Money – Circuit City to be Liquidated
HR World – Circuit City to Close
